Books on Ukraine
Update No: 295 - (26/07/05)
Ukrainian parliamentarians break out into a mélée
An unseemly fight broke out in parliament, the Verkhovna Rada of Ukraine, on
July 7th when deputies made accusations addressed to the speaker of parliament,
Volodymir Litvin. The deputies accused Litvin of biased conduction of the
session and prejudiced submission of drafts, adoption of which was advantageous
In response to the accusations, Litvin replied that he did not lobby anyone's
interests and tried to conduct the session according to corresponding rules.
After that the deputies attacked the Presidium of Verkhovna Rada (VR), using
During this outrage, two deputies pulled the jacket over the head of its owner
and one deputy was set down in the presidential chair and thrown out of it. One
deputy had actually bitten the premier of Ukraine, Julia Timoshenko, and was
The angry deputies pulled out the chair from under Litvin, and then they took
Litvin's microphone away and chucked him out of the hall.
After that Timoshenko and several ministers left the Hall. The first
vice-speaker of VR, Adam Martinyuk, announced a half hour break. Representatives
of deputy groups and factions left for Conciliatory Council.
Timoshenko the real radical; as Yushchenko holds back
This most unparliamentary behaviour reflects profound differences of opinion.
Six months after Ukraine's Orange Revolution, growing rivalries among its
leaders are threatening planned political and economic reforms.
Allies of Viktor Yushchenko, the mild-mannered president, and Tymoshenko, the
firebrand prime minister, are splitting into competing camps. Yushchenko himself
has tried to stay about the fray and assert his authority over both factions.
But he is struggling to hold together a disparate alliance that united to
overthrow former president, Leonid Kuchma, but is now starting to come apart.
Yushchenko said: "I'm happy to have dialogue (with my colleagues). But if
somebody questions a decision after it is made, there might be a problem. I will
not allow that."
The Orange Revolution's supporters are worried that the conflicts could increase
over the next few months as the competing factions prepare for parliamentary
elections next March. One group is formed of politicians close to Yushchenko and
led by Petro Poroshenko, the National Security Council Secretary, which is
cautious in its approach. Ms Tymoshenko leads the other group, which includes
Viktor Pynzenyk, the finance minister, and is advocating bolder measures.
Mr Poroshenko, a businessman with interests in confectionery, banking and media,
favours pro-business policies. On the vital question of a review of questionable
privatisations carried out by Mr Kuchma, Mr Poroshenko supports examining only a
limited list of deals for fear of upsetting business and delaying new
Ms Tymoshenko, a populist who enjoys strong support among poorer Ukrainians, has
argued for a wider assault on the assets of business people linked to Kuchma.
She also wants to end tax-minimisation schemes such as transfer pricing, used
aggressively by Ukraine businesses. Asked about her conflicts with Poroshenko,
Ms Tymoshenko declined to name names but broadly explained the rivalry within
Yushchenko's team as an argument between those she saw as dedicated public
servants and those who "came to increase their capital and re-divide
property, not for the sake of creating a competitive economy, but for their own
Poroshenko said he was glad there were many businessmen in Yushchenko's
administration because they had proved their effectiveness. All his own shares
were placed in an independent trust and he denied that he looked out for his
Poroshenko and Ms Tymoshenko insist they share Yushchenko's vision of
modernising Ukraine, joining the World Trade Organisation and pursuing
membership of the European Union. All three leaders also boast of increasing
social spending in this year's budget and there is broad agreement on the
principle of the privatisation review.
Poroshenko and Ms Tymoshenko have often publicly disagreed and, when Yushchenko
has intervened, he has usually come down on Poroshenko's side - for example, in
arguments over the extent of the privatisation review (where Yushchenko supports
only limited action) and the capping of petrol prices.
Poroshenko, Ms Tymoshenko and Yushchenko all say they would try to form a joint
bloc for next year's parliamentary elections. The vote is important because it
will be preceded by reforms that would transfer many of the president's
considerable powers to the prime minister and make the prime minister answerable
to parliament. Timoshenko's hand would be greatly strengthened against
Kuchma secured these reforms last December in return for agreeing electoral law
changes that paved the way for the re-run of the disputed presidential election
that brought Yushchenko to power. Yushchenko would naturally now like to cancel
the reforms; but parliament has refused. Yushchenko is considering over-ruling
parliament by holding a referendum. The courts will soon rule whether that is
Realism after Orange Revolution
Six months after Ukraine's Orange Revolution, the international investment
community's euphoria about the nation's prospects for an economic and political
overhaul has been replaced a more sober assessment of the country's outlook.
But despite signs of tensions in Ukraine's new government about Kiev's economic
course, in particular in the run-up to next year's parliamentary elections,
analysts remain confident that the country will be able to press on with reforms
and to continue to draw closer to the European Union. "I think overall
there is still substantial optimism - both medium-term and long-term - about
Ukraine's prospects," Deutsche Press-Agentur (dpa) quoted Rory Macfarquhar,
analyst with Goldman Sachs in Moscow, as saying. "This is both in terms of
market reforms and clean government issues as well as closer relations with
Europe," he said.
Indeed, despite the crisis that has engulfed the EU's ambitions for enlargement
that followed French and Dutch referendums, the EU's new member states, such as
Poland and Lithuania, continue to push for deepening Europe's economic ties with
Ukraine and shoring up Kiev's credentials as a candidate for joining the
25-nation bloc. "People are very interested in seeing how the story will
develop with regard to the EU," said Jon Harrison, emerging markets
strategist with Dresdner Kleinwort Wasserstein in London with international
investor interest in Ukraine helping to bolster the national currency, the
Meanwhile, a dramatic reduction in tariffs announced by Kiev in March and a
3-year action plan with Brussels is helping to underpin economic links with the
EU. With a population of about 49m, Ukraine represents a potentially large new
market in Central and Eastern European region's fast-paced economy.
In addition the nation is expected to turn in a growth rate of this year of
about 7% (after 12% in 2004) with foreign investment in the nation expected to
double this year from what has been a low base compared to neighbouring
countries. But, as economic uncertainties surrounding the nation have emerged in
recent years, income growth in Ukraine has slowed, increasing by about 5% in the
first 4 months of this year. But that was down from the 12% recorded in the same
period last year.
In the meantime, support in both the White House and the US Congress for
Yushchenko's political and economic agenda could mean, said Lars Christensen
from Danske Bank in Copenhagen, that Ukraine joins the World Trade Organisation
Apart from the No votes in the French and Dutch referendums which has cast
doubts on the EU expansion drive, the more measured approach taken by investors
to Ukraine follows conflicting signals out of Kiev over its plans for
renationalising of companies that were sold off by the former Moscow-backed
government. "There has been a dose of realism for investors," said
Macfarquhar. "It is 'old Europe' which is definitely more hesitant about
feeding Ukraine's hopes," he said.
Further underscoring the role played by Warsaw in sponsoring Kiev's EU
aspirations some international companies are considering using neighbouring
Poland as a spring-board into Ukraine. Poland and Lithuania were two of eight
Central and Eastern nations that formally signed up for EU membership in May
However, even before the fall-out from the resounding No votes in France and the
Netherlands plunged the EU into a period of soul-searching about its future,
analysts believed that investing in Ukraine involved considerable risks.
Analysts say Kiev also faces pressure to maintain the social payments system of
the previous governments as well as they are concerned about how Yushchenko will
seek to rebuild political ties with supporters of the former regime, who tend to
look more towards Russia than those backing the president and his campaign to
join the EU. Despite the push by Yushchenko to refocus his country on western
Europe, more than 35% of Ukraine's trade is with Russia.
Nevertheless, Julia Tsepliaeva, economist with ING Bank in Moscow, remains
upbeat that Kiev will be able to overcome its current problems and to forge
ahead with economic change. "There are substantial short-term risks because
of this privatisation process," she said. "But after 2006, Ukraine
should enjoy a much improved situation."
Turkmen gas to the rescue?
Ukraine is trying to lessen its reliance on Russia for energy supplies,
which periodically causes a rumpus with Moscow, as in May-June this year.
In September 2005, Ukraine and Turkmenistan might sign a 25-year contract on
supplies of Turkmen natural gas to Ukraine, which will turn the Central Asian
republic into Ukraine's main gas supplier. "I have handed over Ukrainian
President Viktor Yushchenko's invitation to President Saparmurat Niyazov of
Turkmenistan to visit our country and sign the contract on natural gas
deliveries to Ukraine for the period of 25 years," Alexei Ivchenko, the
board chairman of Naftogaz, Ukraine's national oil and gas company, told a news
briefing at the end of June.
Ivchenko said Niyazov had given his verbal agreement to visit Ukraine in
"Ukraine is drafting the contract," said Ivchenko. "We expect
Turkmenistan to supply 60 billion cubic meters of natural gas (a year) to
Ukraine." Ivchenko did not disclose how much the contract was worth, saying
it was a commercial secret. He said the contract might come into force in 2007.
Turkmenistan supplies natural gas to Ukraine via Russia and satisfies about 50%
of the country's demand for the fuel.
World Bank loans Ukraine 106m for hydroelectric power
Ukraine's reform-minded government scored a financial victory recently by
securing a multi-million dollar loan from the World Bank to develop
hydroelectric power, according to UT-1 television news report. The US$106m
credit will run for 18 years with a six-year grace period. The loan is the first
instalment of a US$374m World Bank project aimed at bringing Ukraine's national
hydroelectric power infrastructure - among Europe's largest - to modern
The Ukrainian state-owned company Ukrhidroenergo will use the money to overhaul
six dams on the Dniepr River, and a seventh on the Dniestr River. Once complete
the programme will be the largest foreign assistance project in Ukrainian
history, after aid for the Chernobyl nuclear power disaster. Besides dam repair
the World Bank loan will enable Ukrhidroenergo to purchase 70 new turbines for
nine hydroelectric power stations. Much of the money will remain in the
Ukrainian economy as the Kharkiv-based company Turboatom, one of the world's top
producers of hydroelectric turbines, is expected to win the tender to fit out
the power stations.
Ukraine generates 8.7 per cent of its electricity using hydroelectric stations.
Another 38 to 40 per cent is produced by nuclear energy and the remainder by
Ukraine hopes to increase the share of water-produced power in the mix by
improving the efficiency of its hydroelectric stations, half of which were built
in the 1930s, and have been poorly maintained since then.
FOOD & DRINK
Danone to set up production in Ukraine
Leading French food company, Danone, plans to set up production in Ukraine,
a source familiar with the company's plans said, Interfax News Agency reported.
The source said that production might be started in 2005. The amount of
investment in this project and the capacity of the future plant have not yet
been disclosed. Danone products are currently imported into Ukraine.
Polish, Ukrainian presidents witness car, steel plant deals
The presidents of Poland and Ukraine presided over the signing of two major
bilateral industrial deals at the VIII Poland-Ukraine Economic Forum in the
Baltic port city of Gdynia recently.
Poland's Alexander Kwasniewski and Ukraine's Viktor Yushchenko watched as
Ukraine's Avtozaz motor company formally inked a deal for the takeover of 20 per
cent of shares in Poland's troubled FSO car plant and the acquisition of
Poland's Huta Czestochowa steel mill by Ukraine's Industrial Union of Donbass.
Ukraine's Avtozaz already buys up almost all of FSO's output, using the parts
from the Polish plant in the assembly of Daewoo models at Avtozaz car works in
FSO produces Daewoo Lanos and Matiz model cars and car parts. There has also
been media speculation over whether a new-model Lanos or perhaps even a General
Motors-made Chevrolet model may be introduced to the FSO product line. US
carmaker GM took over part of South Korea's insolvent Daewoo which had
previously controlled 80 per cent of FSO.
The FSO plant currently employs more than 2,000 workers who have lived in
uncertainty since the company hit hard times in 1999 when Daewoo became
insolvent. The company then handed over control of its 80 per cent share in FSO
to Poland's State Treasury.
The presidents also presided as officials from Ukraine's Industrial Union of
Donbass sealed the deal for Poland's state-held Huta Czestochowa steel mill.
Donbass had managed to out-manoeuvre Indian-owned titan Mittal Steel which
dominates the Polish steel market with seven million tonnes of annual
production. Mittal Steel fell out of the running for Huta Czestochowa after
failing to agree on a labour package with the mill's unions. Donbass succeeded
in subsequent labour negotiations.
Kwasniewski also called on other EU states to adopt free visas for Ukrainians
similar to those granted by Poland which joined the EU in May 2004. "I am
convinced that we as the European Union should adopt the standard which for many
months has been in force in Polish-Ukrainian relations - no visas to Ukraine and
free visas for Ukrainians to all EU countries," Kwasniewski was quoted by
the Polish PAP news agency as saying.
"This is our postulate, which I am putting forth vocally to our EU partners
and I believe that it will be accepted," he said.
Kwasniewski also backed Ukraine's drive for closer ties with NATO and its drive
for closer ties and eventual membership in the European Union. "I trust
that no one will lack the energy, conviction and determination that will
strengthen an independent Ukraine and a sovereign Poland and build our strong
position in Europe," he said.
Poland, both at the political and social level, was the strongest European
backer of Ukraine's recent pro-democracy "Orange Revolution" and has
since demonstrated consistent diplomatic support for Ukraine's drive for closer
integration with Western European institutions.
Yushchenko, a key leader of the Orange Revolution and enthusiastic pro-market
reformer, echoed Kwasniewski. "Today we clearly say we are a country which
is aiming for European integration. We are an integral part of European
integration," he said.
Yushchenko also told Polish and Ukrainian business leaders gathered at the
bilateral business forum they should be a driving force in the further
integration of Europe.
Ukraine, Macedonia to cooperate
The presidents of Ukraine and Macedonia announced plans on June 27 for
cooperation on high-tech manufacturing and energy development. The main means of
developing the sectors will be via joint ventures between state-owned companies
in the two countries, Macedonia President Branko Crvenkovsky was quoted as
saying by the Interfax News Agency.
Crvenkovsky was in Kiev on a one-day visit to his counterpart Viktor Yushchenko.
The pair met in the morning in one-on-one talks, and later jointly chaired
expanded discussions devoted primarily to economic issues. Negotiations produced
an agreement for the two countries' high-tech machine-building sectors to share
manufacturing techniques and markets via "free trade zones," allowing
the companies to trade with one another without paying excise, Yushchenko said
at a subsequent press conference. "We need to move to the creation of the
joint ventures," Yushchenko said. Delivery to Macedonia of Ukrainian fuel
transport systems and hydroelectric technologies was the second sector named by
the Yushchenko and Crvenkovsky as a development priority. An overhaul of
Macedonia's oil and natural gas transport system by Ukrainian pipe-manufacturing
and laying companies, plus possible installation of Ukrainian hydroelectric
equipment on Macedonia rivers, received special emphasis and would be the topic
of a multi- departmental talks, Yushchenko said. Besides high tech and energy
Ukraine and Macedonia hope to intensify cooperation in aerospace manufacturing,
and transportation and construction, Cverenkovsky said. The giant Macedonia
road-building company Granit is the largest foreign rail line builder in
Ukraine. Granit's know-how has been critical in allowing the Ukrainian national
rail company Ukrzheleznitsia to open modern rail service between the capital and
the provincial centres of Kharkiv, Dnipropetrovsk. Macedonia also wants to
export more medicines to Ukraine in exchange for Ukrainian agricultural
technologies and goods, Cverenkovsky said.
The two presidents also signed protocols committing their countries' governments
to a 12-month programme devoted to developing trade. Relations between Ukraine
and Macedonia are traditionally good. Ukrainian tanks, attack helicopters, and
according to some reports, mercenaries, assisted Macedonia in the Balkan
country's recent conflicts with Albanian separatists.
Universal Bank offers Ukraine US$172m loan
Universal Bank gave Ukraine US$172m as a programme systematic lending (PSL). The
chief of Department on State Debt of the Ukrainian Ministry of Finance, Galina
Pakhachuk, said the money would be transferred shortly. She noted that Universal
Bank might lend US$250m in the first half of July according to the new programme.
The government of Ukraine will initiate a new three-year programme of
cooperation with Universal Bank. The target of the new programme is to get
US$1.5bn and the first transfer is expected to be equal to US$500m in this year,
New Europe reported.
World Bank approves US$251m loan for Ukraine
The World Bank's Board of Executive Directors has approved the First Development
Policy Loan for Ukraine for US$251.26m, the bank's representation in Kiev said,
New Europe reported.
"The fast-disbursing development policy loans (the successor to the PAL
programme) are designed to support a comprehensive set of policy and
institutional reforms" and they will remain the centre of the assistance
programme for Ukraine, the release said. "The Development Policy Loan
(DPL-1) is the first in a planned series of three annual loans designed to help
the government translate its objectives into a sequenced and prioritised
programme of actions.
Czech president visits Ukraine
Czech President, Vaclav Klaus, arrived on June 14th for a state visit, according
to a Ukrainian government statement. Klaus met with his Ukrainian counterpart,
Viktor Yushchenko, in face-to-face talks in Kiev's Maryninsky palace, New Europe
Discussions were expected to focus on increasing economic cooperation between
the two countries, and on possible Czech assistance for Ukrainian efforts to
join the European Union. The two presidents were set to chair wider discussions
including Ukraine's Foreign Minister, Borys Tarasiuk, and other senior Ukrainian
government officials later in the day. A joint press conference was scheduled.